Tony Abbott: RET a Threat to Jobs in All Industries (not just Aluminum Smelters)

Over the last week or two the press has been giving a fair bit of coverage to the fact that there are 25 Coalition Members who are trying to find a “Goldilocks solution” to the disaster that is the mandatory Renewable Energy Target.

The group – which is being directed by Ian “Macca” Macfarlane – is headed up by Dan Tehan (Member for Wannon) from Western Victoria. Macca’s unseemly links with near bankrupt wind power outfit, Infigen are legend (see our post here). Apparently, Macca just can’t help himself: he’s trying to put together a “package” that will save Infigen from the certain doom pending the RET Review Panel’s recommendations – to be delivered in early August.

What’s less well known is that Tehan is trying to have an electoral bob each way. On the one hand, he’s betting on a partial retention of the mandatory RET; on the other, he wants a 100% exemption for aluminium smelters from the crippling cost impact of the RET.

Dan Tehan: trying to back 2 horses at once.

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In his electorate, Tehan has a significant beneficiary of the mandatory RET, Keppel Prince – which has built towers for the imported turbines used in a number of wind farms (it’s a metal fabricator and carries our general engineering work, besides). Keppel Prince was under threat long before the Coalition’s RET Review Panel got to work – wind farm construction activity has slowed from a flood to a trickle; and, in any event, wind power outfits are more likely to get their towers built at a lower cost in China in future (if there is one for wind power?). And any outfit that builds its business model around an industry subsidy scheme with a limited lifespan only has itself to blame when the plug gets pulled.

Tehan has made a number of public statements seeking to protect the mandatory RET; and, therefore, what’s left of Keppel Prince’s wind turbine tower fabrication business.

Tehan, however, has a representational dilemma on his hands. He also has a major aluminium smelter owned by Alcoa at Portland to consider. Alcoa’s smelter employs around 600 (directly) and sustains the regional city of Portland. Hence, his each way bet (see our post here).

STT hears that a large number of the 25 Coalition Members – seemingly members of Tehan’s posse – are keener than ever to scrap the mandatory RET outright – and fall within the broader majority of Coalition Members with that outcome clearly in mind.

More importantly, though, the Head Boy isn’t limiting his concerns about the cost impact of the mandatory RET to a few transient (subsidy dependent) jobs building turbine towers; or even the 5,000 or so employed by aluminium smelters.

No, Tony Abbott is acutely aware that the mandatory RET has resulted in spiralling power costs; and, therefore, is placing thousands of jobs at risk, as well as needlessly punishing Australian families. Here’s extracts of the PM being interviewed on ABC radio’s AM.

CHRIS UHLMANN: Tony Abbott called it his “pledge in blood” to abolish the carbon tax – but despite that, the Labor government’s scheme turns two today. The Prime Minister expects to be able to fulfil his promise when new Senators are sworn in next week, but that hope rests on the contrary figure of Clive Palmer. Even that new Senate looks likely to reject billions of dollars of the Prime Minister’s first budget and delicate negotiations will be needed to rescue those savings. But with increasing signs the public’s hasn’t accepted the budget, will the Upper House do the deals he needs? Prime Minister Tony Abbott joins me now.

….

CHRIS UHLMANN: One thing that we do know is that the carbon tax is going up today. Do you trust Clive Palmer to keep his word and cut the carbon tax?

TONY ABBOTT: Chris, I expect all of the crossbench senators to be true to their pre-election commitments, and obviously the Palmer senators did make that commitment loud and clear before the election that they were against the carbon tax and they’ll repeal it.

Mr Palmer spectacularly declared last week that he was going to vote to repeal the carbon tax.

So I don’t take anything for granted and I don’t count my chickens prematurely but nevertheless, I think the public are entitled to expect the carbon tax to go in the next week or so, and certainly the last thing we want is the world’s biggest carbon tax just going up and up and up and obviously it did go up today, pending repeal in a fortnight’s time.

…

CHRIS UHLMANN: Now, 25 of your backbenchers have written to you asking for aluminium smelting to be exempt from the renewable energy target. Will you do that?

TONY ABBOTT: Chris, look, we’ve got a review underway of the renewable energy target. We’ve got a good team that’s doing it. I’m going to wait for the review, and then we’ll respond.

But obviously, the point I’ve been making pre-election and post-election is that the renewable energy target is very significantly driving up power prices. Increasing power prices obviously pose a serious threat, not just to domestic budgets, but also to the competitiveness of industries, particularly energy-intensive industries.

I think we should be the affordable energy capital of the world, not the unaffordable capital of the world, and that’s why the carbon tax must go and that’s why we’re reviewing the renewable energy target.

CHRIS UHLMANN: And to cut it?

TONY ABBOTT: Well, I don’t want to lose perfectly good industries that employ thousands of people and which value-add for our country …

CHRIS UHLMANN: So you think it should be lower?

TONY ABBOTT: The review is taking place now, Chris, and let’s wait and see what the review comes up with. But all of us should want to see lower power prices and, plainly at the moment, the renewable energy target is a very significant impact on higher power prices.

…

CHRIS UHLMANN: Prime Minister, thank you.

TONY ABBOTT: Thank you so much.

CHRIS UHLMANN: Tony Abbott.

ABC (AM)

STT hears that Tony Abbott is keener than ever to scrap the mandatory RET in its entirety. And he’s not alone. Here’s the editor of The Australian.

Renewable Energy Target is holding back the nation
The Australian
2 July 2014

THE strongest argument for taking immediate action on climate change has always been about insurance risk: acting quickly will produce big savings over the long run. Even if the worst predictions do not come true, the potential impact is so great it would be irresponsible not to guard against them. For some people, however, there seems no need to consider the premium cost of the climate-change insurance being offered.

The Labor-Greens compact produced a $26-a-tonne carbon tax, in front of much of the world. The Rudd-Gillard government also boosted the Renewable Energy Target to the point that it will most likely account for 27 per cent of our electricity generation by 2020 rather than the 20 per cent that was widely assured. Modelling for Dick Warburton’s RET review estimates that over the period to 2040 the RET will increase electricity costs by $12.8 billion. Deloitte Access Economics says the RET costs about $125 a tonne of carbon abatement — or five times the cost of the outgoing carbon tax.

Given the state of climate science — including legitimate questions about what has caused a seven-year pause in average global surface temperatures that climate models failed to predict and what this might mean about the true sensitivity of Earth’s climate to rising levels of atmospheric CO2 — it is proper to ask whether the rush to a RET is money well spent.

For some, the RET is an expensive, kneejerk policy that is pumping billions of dollars into existing technologies that are a short-term solution, at best, ultimately destined to fail. This view is gaining currency, with feed-in tariffs and other subsidies being cut back in Germany, Spain and Britain, which are among the most enthusiastic supporters of global action to cut CO2 emissions. European governments are concluding the cost benefit of subsidising renewable energy does not stack up when put alongside the political and economic cost of rising electricity prices.

It is telling that US President Barack Obama did not highlight renewables in his ambitions to cut CO2 emissions by 30 per cent from electricity generation. He chose gas and nuclear ahead of wind and solar. In Australia, forcing investment into renewables risks stifling non-renewable but greenhouse-friendly energy sources such as gas.

Renewable energy advocates have tried to muddy the waters on the cost of the RET by claiming incumbent fossil fuel generators enjoy an unfair advantage and that the mining industry receives heavy subsidies via infrastructure spending. But, as Henry Ergas has outlined, a proper analysis shows the subsidy mining gets is one-fortieth of that claimed by renewable energy supporters and is swamped by the billions earned by government in royalties from mining.

While support for the RET owes more to ideology than common sense, the issue is now politically red-hot. Like Labor and the Greens, Clive Palmer wants to retain the RET. The Coalition is likely to support a “true” benchmark, which would see the large-scale RET target cut by about 15,000GW/h.

Those who argue there are similarities between climate change policy and tariff reforms of the Hawke and Keating era confuse the liberating effect on business of globalisation with the stifling constraints of higher energy costs. There are chances for innovation and enterprise in promoting renewable energy use, but government has shown itself to be a poor judge when it comes to picking winners.

The RET is more like industry protection of old; holding back innovation and featherbedding an industry that must learn to stand on its own feet. It is also holding back investment in other technologies that may be a better long-term solution for the planet — and the wallet.The Australian

And it’s not just The Australian that sees the mandatory RET as an economy destroying job killer. Lefty business rag the Australian Financial Review has joined the chorus and sees the mandatory RET as a pointless, inefficient and costly way of reducing CO2 emissions.

Carbon policy left with weakest link
Australian Financial Review
3 July 2014

After a stillborn emissions trading scheme, a carbon tax now set to be dumped, and Direct Action a non-starter, Australia is left with the renewable energy target as its flagship policy for reducing carbon emissions.

The RET is one of the least cost-efficient carbon reduction options and will almost certainly lead to rising power prices, but with the support of the Palmer United Party senators it is the one policy that looks set to stay.

Of all the means for reducing emissions that have come and gone in Australia, the most efficient and politically sensible is some form of emissions trading scheme with the carbon price initially set low, but rising as other countries join in.

Now, after a string of policy mis-steps with successive governments first proposing an emissions trading scheme, then turning a traded price on carbon into a tax instead, and then abolishing the tax, we are to be left with only the RET.

The RET was originally introduced into carbon policy almost as an afterthought – and without a proper cost-benefit analysis – and has produced its own policy comedy of errors. A provision for generating the Renewable Energy Certificates used by the scheme from small scale systems (such as rooftop photovolatic panels, and solar hot water systems) resulted in a fall in REC prices which discouraged the development of the wind farms required to meet the target.

Stringent planning guidelines in some states brought in as a result of complaints about the noise from the farms has further delayed windfarm development. All this means a serious wind construction bottleneck is likely to develop if energy companies are forced to meet the RET.

The renewable energy industry has pointed to modelling work which indicates that wholesale energy prices will be lower under the RET out to 2030. But that may be a temporary effect, and the modelling has not been made public or fully analysed. Further, the RET dictates to industry which technologies they must use – and some of them have clearly been left behind.

To date, the impact of the RET has not been great. Despite Prime Minister’s Tony Abbott attempts to blame the green energy sector for the higher electricity prices, the reasons for price rises to date have been for more mundane reasons such as rebuilding networks to cope with very hot days.

But the RET still remains an inefficient method of carbon reduction. Poor choices combined with Clive Palmer’s intransigence, has left Australian climate policy with the worst of all worlds.Australian Financial Review

The AFR has taken a pro-wind power stance from the very beginning, so, no surprise then that – in running the “poles and wires” furphy – it aims to exonerate the wind industry from responsibility for the fact that Australians now face the highest power prices in the world (whereas, less than a decade ago, we enjoyed the lowest).

Given its bias, we wouldn’t expect the AFR to engage in any serious analysis of wind power costs. However, it might like to start with the impact that Power Purchase Agreements have on retail power costs: PPAs that guarantee wind power generators rates which are 3-4 times the average wholesale price; irrespective of the price at which it’s delivered to the grid (see our post here).

It could go on and start digging into the insane costs of providing fast start-up peaking power (primarily from costly and highly inefficient Open Cycle Gas Turbines) needed to keep the grid up and running when wind power disappears every day and for days on end (see our posts here and here and here and here and here and here and here).

And, were it seriously interested in the causes of spiralling retail power costs, the AFR would look at the Enron like rorting and gaming of the power market by AGL and others – using wind power “outages” as an opportunity to exploit the market.

The AFR might also like to explain why it is that Australia’s wind power capital, South Australia, has the greatest installed wind power capacity in the nation and the highest retail power prices in the world? Mere coincidence, perhaps? (see our posts here and here).

And next time it starts waffling about power prices and “poles and wires” it should direct its attention to the cost of duplicating the network simply to accommodate wind power (wind farms are located remotely from the markets for power and, if any further capacity is built, entirely new transmission lines will need to be built at a cost in the order of $30 billion – see our post here). As a taste of things to come, it should have a look at the $107 million upgrade to the Heywood interconnector for no other apparent purpose than to convey South Australian wind power to Victoria at night-time (see this article).

But the worst is yet to come: the real and most serious cost impacts of the mandatory RET kick in from 2017, when the target hits 27,200 GWh – from there, it rockets to 41,000 GWh in 2020 and continues at that rate until 2031 (see our post here).

The mandatory RET/REC scheme is nothing more then a giant TAX on all Australian power consumers: with the proceeds either chanelled as corporate welfare to near bankrupt outfits like Infigen (as RECs); or pocketed by the Government, as the shortfall charge. And all of that adding $50 billion or more to power costs, for absolutely no measurable benefit whatsoever.

The mandatory RET must go now.

Watch out Tony, the bloke behind you has nothing but Infigen’s interests at heart.

Comments

Tehan also has to contend with the growing number of impacted residents in South west Victoria suffering with the noise, health impacts of industrial wind turbines being located too close to their properties. Time to stand up and be counted Dan.
Keith Staff

In reference to Dan Tehan’s attitude, it is very much like the wind in that you do not know where it is coming from next. Is he there for his feel good moments or what? Recently he was rubbing shoulders with the Waubra Wind Fraud Leader, Mr Andrew Thomson of Acciona, with local Councillors, including our local rep Cr Clark who is a employee of the Waubra Wind Farm reference group. This was a public event to advertise the fact that after 5 years Acciona was doing 8 weeks of noise monitoring that was not done correctly 5 years ago and nothing to do with proving compliance to the complaints process.

Did Dan Tehan or Cr Clark discuss with the CEO of Acciona what the testing consisted of? The issue of noncompliance to planning permit was the reason given for adverse health affects 5 years ago at the Waubra Wind Farm. It was the cause of the Senate Inquiry. I highly suspect they did not. The lack of enforcement of permit conditions in relation to noise and the placement of turbines is the cause of so much harm to nearby people.

Acciona has been working with the Victorian Department of Planning to do testing to prove compliance. The Planning Minister has been requesting information because he is not satisfied that Acciona has complied with conditions of permit since December 2010. In January 2014 the planning Minister accepted Acciona’s offer to do testing but not to include low frequency sound. This offer is in direct conflict with the request of the planning minister made after the Senate inquiry in 2011.

The testing taking place involved about 10 minutes and up to 30 minutes of subjective assessment using no equipment 5 times over an 8 week period. I refused to take part because I considered it a Fraud and told the department so. The testing did not include the Sound Exposure Level that we experienced at the time that brought about the complaint and it did not even specify that the turbines needed to be operating. In fact one assessment to be done all of the night to prove compliance was done when the turbines were not running and no wind at the location where the so called testing was being done. The testing crew was interviewed by a neighbour at between 10.30 p.m.and 10.45 p.m with Acciona Site Manager on the side of the road. I suppose Dan Tehan and Cr Clark would consider that to be independent of the Operator and fair for the residents that they propose to represent.

It is important to note that the ‘poles and wires’ argument also includes the ‘smart grid’ concept ie. the idea that a grid will be so smart that it can work out all by itself how to cope with intermittent surges of power at random intervals of variable amounts over variable periods of low and peak demand. Mathematically it is impossible to build such a system yet it is what ‘wind power’ (and solar power that is fed into the grid) demands to be a conceivably practicable contributor to a functionable national grid.Even the ‘climate catastrophists’ at the CSIRO concedes that will cost $240 billion dollars over the next ten years (a conservative estimate to achieve a mathematically impossible outcome!). Despite this fact, ‘Macca’ and his mate Greg Hunt still want to pursue a fixed RET. The rent seekers, which include AEMO (because think of the fun they would have with that money), will enjoy it all for awhile but destroy the people and businesses they are meant to serve in a very short time (yes, like in Spain). Most in the coalition ranks and even plenty (who won’t out themselves) in the labor party know the truth. The trouble is a few powerful figures who have compromised themselves by previous statements and probably giving unwise and irresponsible assurances to those bellowing about sovereign risk. Abbott just might have to save their backsides by putting any such individual on the bench(ie. ‘back bench’). For all our sakes the sooner the better.

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